The cities of Indianapolis and Toledo competitively bid their respective wastewater
treatment facilities. An international private firm won the bid in Indianapolis. A joint
municipal union-management team walked away the winner in Toledo. In both cases, the
bottom line was a windfall for taxpayers.

The two Indianapolis Advanced Wastewater Treatment (AWT) facilities had won national
awards when Mayor Stephen Goldsmith considered the privatization option. In January 1994,
the mayor settled on a five-year agreement with the White River Environmental Partnership
(WREP) to run the day-to-day operations, the largest contract of its kind in America.

The WREP was experienced in both predictive and preventive maintenance. The city still
pays for any capital expenditures, capacity increases and costs associated with corrective
maintenance. But more efficiently run equipment has resulted in a substantial reduction in
energy costs. The average AWT monthly electric bill under city management was about
$450,000. Today, power costs are about one-third less.

Additional savings were realized by cutting 160 workers from the 328 employed by the
city and transferring them to other jobs. This helped shrink the operating budget from $30
million annually to $17.5 million a year, about a 40% savings. The city administration
plans to put an expected $65 million over the life of the agreement back into the aging
infrastructure.

WREP also recognized AFSCME Local 725 and entered into one of the first contracts in
the country between a private company and a municipal union. It was ratified by more than
a 20-1 margin. Since then grievances, which averaged 38 a year, fell to one the first and
none in the second year. The accident rate dropped 80%. Workers now earn an average of 3%
more than in their former city positions.

Environmentalists worried that "money-hungry, private profiteering people were
going to do nasty things to the water." However, WREP spokeswoman Lou Ann Baker told The
Detroit News that the contract specifically says the firm "will provide water
treatment equal to or better than previously provided by the city." And, she says, it
has lived up to that commitment.

Toledos Bayview Wastewater Treatment Plant was poorly managed, overstaffed and
inefficient. Mayor Carleton S. Finkbeiner entertained bids from ten private sector
managers, as well as the citys labor-management team. Last March, Professional
Services Group was selected as the best of the private proposals. But in the process of
negotiating a tentative contract with PSG, Mayor Finkbeiner opted to retain the city/union
operating team and keep most of the in-house staff in place.

When AFSCME Local 2058 discovered the city was serious about bidding the work out, says
Mayor Finkbeiner, labor got serious about new work rules, cutting costs and cooperating
with management. The city administration, in turn, committed a new cadre of managers to
the operation.

The number of workers at the plant dropped to 125 from 135. Through attrition, the
mayor expects that number will eventually drop to about 85 employees. Today, a more
efficient water reclamation operation saves Toledo close to $2 million a year.

As Detroit looks for ways to pare costs and improve city services, Indianapolis and
Toledo offer two contrasting models that work.